It is Christmas Eve at the home of Hans Stahlbaum, the town mayor. The wealthy Stahlbaum family is hosting a festive holiday party for family and friends, and the Stahlbaum children, Clara and Fritz, are anxiously awaiting the arrival of the guests. As the guests arrive, the party starts with games and dancing. Arriving late to the party is the Stahlbaum children’s mysterious godfather, Herr Drosselmeyer. He delights the party guests with his life-size dancing dolls and gifts for the children. Clara is presented with a beautiful nutcracker and is immediately taken with it. Being jealous, Clara’s little brother, Fritz, tries to take the nutcracker from Clara, and in the chaos he accidentally breaks it. Herr Drosselmeyer wipes Clara’s tears and repairs the nutcracker. When the guests depart, Clara and Fritz are sent to bed. Clara returns to the darkened living room to search for her nutcracker and falls asleep clutching it. Her dream then begins . . .

Clara awakens suddenly, stunned by the events she sees happening in her living room. The Christmas tree has grown to an enormous size, the toys have come to life and life-size mice are scampering around the room. Fritz’s toy soldiers have come to life and are marching toward Clara’s nutcracker, which has also grown to life-size. A battle is soon underway between the mice and the soldiers. Just when the soldiers seem to be winning, the great Mouse King appears and the tide turns. The Nutcracker and the Mouse King fight and as the Mouse King is about to overpower the Nutcracker, Clara hits him with her shoe, stunning him long enough for the Nutcracker to stab him with his sword. The Nutcracker turns into a handsome prince and as snow begins to fall, Clara’s enchanted evening continues.

Clara and Herr Drosselmeyer arrive at the Land of the Sweets and all the wonderful inhabitants of this beautiful land enter the throne room to pay homage to Clara. The Sugar Plum Fairy then arrives and Clara is crowned princess. The prince tells Clara he lives in The Land of the Sweets and rules from the Marzipan Castle. Clara and Herr Drosselmeyer are entertained by several dance performances including the Spanish Dance, the Arabian Dance, the Chinese Dance, the Mirlitons, the Russian Dance, Mother Ginger and her children, the Bon Bons, and the Waltz of the Flowers. The Sugar Plum Fairy and her Cavalier then dance for Clara. When the festivities are over, everyone bids goodbye to Clara and Herr Drosselmeyer.